Marriott enters affordable midscale in a big way

BETHESDA, Maryland  – Marriott International’s entrance into the affordable midscale segment with its now completed $100 million purchase of the City Express brand portfolio from Hoteles City Express, S.A.B. de C.V. in Mexico is being done so in no small fashion. It marks one of the company’s biggest single acquisitions by room count (17,000 rooms across 150 hotels) and increases its presence in the Caribbean and Latin America (CALA) region by approximately 45% to more than 480 properties across 37 countries.

“This is a historic moment for us to enter this category, and to purchase this number of hotels at once,” Marriott President for Caribbean and Latin America Brian King told Hotel Investment Today on Monday.

The deal that makes Marriott the biggest player in the region is also loaded with growth potential, King said. And what will further drive growth through a combination of new-build and conversions, King added, is its ability to come to market with greater speed. “What’s been interesting about this business model is they can build a hotel sometimes within 13 months from start to finish,” King said of what become Marriott’s 31st brand. “They have a really refined the supply chain and have a really tight prototype. So, your hold time is typically shorter than most hotels. That’s very appealing.”

Brian King

The current City Express owners will become Marriott franchisees and Hoteles City Express will become the largest franchisee and manager. Its CEO and brand creator Luis Barrios will become a member of the franchise advisory board. “Luis has this great entrepreneurial spirit and deeply understands the heartbeat and ethos of the region,” King said. “City Express is a great hospitality company with shared values around service, associates and their owners. They run a great business. So, for us, it was an amazing cultural fit that made the rest of the deal go as smooth as possible.”

King said the existing ownership community has been reacting positively to the sale and he expects few, if any, challenges in converting them to the Marriott system. “One of the reasons why they’re excited is because, obviously, Luis and his team have signed up for this,” King said. “He has long-term relationships with these owners. He knows the best interests of the brand and we want to make sure those interests are protected… So, of course, there may be some owners with a different point of view. But, honestly, at this point, that’s not the case.”

At the moment, King said City Express properties are performing well, rebounding from the pandemic similarly to what so many other brands have experienced. They are also seeing somewhat of a shift to more leisure business. Without being able to be specific, by joining the Marriott system King expects owners will see a top line bump in revenue, as well as cost savings due to increased scale.

It’s an economic model that has amazing speed for scale. We should be able to build these quickly – more quickly than a traditional hotel.

Brian King

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As for growth, with hotels in some 75 Mexican cities today, King sees adding another 10 per year there as being viable, and that doesn’t include opportunities in Colombia, Costa Rica, Chile, and certainly Brazil. Currently, the City Express pipeline includes three hotels (409 rooms) under construction that are scheduled to open in 2023 and six more hotels (715 rooms) to begin construction at an unspecified later date.

“Brazil is almost untapped for us when you look at the amount of distribution that we have today,” King said. “We also know that this moderate tier is very appealing to the Brazilian traveler. That was one of the reasons why we wanted to be there.”

In addition, Marriott has global aspirations for City Express and there has been rumbling about bringing the brand to the U.S. and Canada. However, King would not comment on potential growth there, adding, “We’re really in the first inning. We need to stabilize what we’ve purchased first, and then we’ll see how it continues to expand.”

In the coming months, the City Premios loyalty program is expected to be retired as it is integrated into the Marriott Bonvoy platform. King added that Marriott will add the “by Marriott” endorsement and plans to make some slight tweaks to the concept. In fact, it will be showcasing the brand with a model room at the CHRIS/HOLA conference, May 21-25, in Miami.

“It’s an economic model that has amazing speed for scale,” King concluded. “We should be able to build these quickly – more quickly than a traditional hotel... So, in today’s world, I think that’s really appealing to investors.”